The war in Ukraine risks exacerbating the challenges to Europe’s cohesion that specific social groups and regions were already facing. Coming on the heels of the pandemic, the energy crisis triggered by the war has further worsened the financial situation of all households, particularly poorer and older ones.
Regional cohesion is likely to suffer from the compounded effect born by geopolitical uncertainty, an influx of refugees and the energy shock. Therefore, all efforts must be made to further strengthen social and regional cohesion.
Regions will need to transform in the coming decades to reach the European Union’s climate goals and reduce the digital divide. Without this broad-based transformation, Europe will not be able to reduce its dependence on fossil fuels in the medium term or reach carbon neutrality in the longer term. Fast transformation requires flexibility, new ideas and investment by public and private stakeholders alike.
In 2022, the EIB Group provided €28.4 billion to projects in cohesion regions, or 44% of the Group’s total lending in the European Union. Across the EU, EIB lending supported projects with a total investment cost of €146 billion in 2022.
Lending by public policy goal
Lending in cohesion regions covers a wide spectrum of economic activities, which are reflected in the European Investment Bank’s Public Policy Goals (PPG) Framework. The framework reflects the Bank’s lending priorities and ensures that these are aligned with the political priorities set by the European Union. The framework also enables the Bank to balance its support across the different policy goals and provides a clear framework for communication and reporting on its lending.
The current PPG framework relies on four vertical public policy goals: sustainable cities and regions; sustainable energy and natural resources; innovation, digital and human capital; and SMEs and mid-cap finance. In addition, two horizontal objectives are embedded in the framework: economic and social cohesion; and climate action and environmental sustainability (CA&ES).
Climate action and environmental sustainability (CAES) is, like cohesion, a horizontal objective of the EIB. In 2022, there was no trade-off between the two horizontal policy goals as, for the second year in a row, the share of CAES was higher in the Bank’s cohesion lending than in its overall EU lending.
Lending by country
Of the EU’s 145 cohesion regions, 67 are transition regions and 78 are less developed regions. The less developed regions are mostly located in Central and Eastern Europe, as well as in Portugal, Greece and the southern parts of Italy and Spain. Many of the transition regions, by contrast, are former wealthy industrial regions struggling to cope with globalisation and technological change. They can be found across the European Union, including in wealthier Members States such as France, the Netherlands and Finland
Contribution to the UN’s Sustainable Development Goals (SDGs)
The following chart gives a visual summary of the EIB’s impact through the lens of its contribution to the SDGs in Europe’s cohesion regions, based on operations financed by the Bank in 2022.
Focus on innovation
Innovation is a key driver of growth and competitiveness and a strategic priority for both national and EU policies. Although the approach towards innovation is very different across countries and economic sectors, one of the common factors to accelerate and stimulate innovation at scale is the existence of a supportive ecosystem providing adequate infrastructure.
In cohesion regions, EIB action is mostly focused on putting in place the key elements for an innovation-supportive ecosystem. As evidenced in the graph(s) below, projects contributing to the Innovation, Digital and Human Capital public policy goal in “pure” cohesion countries have a strong infrastructure component (e.g. composite infrastructure, transport and fibre access network), with a positive impact on the destination country’s/region’s capital allocation and, hence, on its growth potential and ability to compete in wider markets.
As we move away from “pure” cohesion countries, EIB financing for IDHC tends to be increasingly concentrated around industry and manufacturing, with intangible investments on the development and deployment of advanced manufacturing and innovation being predominant. What also stands out is the high share of financing in the area of (academic) research (included in the category of “services” in the graph below), especially for the “predominantly cohesion” countries.